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2022 DIGILAW 159 (JHR)

Sanjay Kumar Sharma v. Bharat Coking Coal Limited

2022-02-10

RAVI RANJAN, SUJIT NARAYAN PRASAD

body2022
JUDGMENT : 1. With the consent of the parties, the matter has been taken up through video conferencing. They have no complaint whatsoever regarding audio and/or video quality. 2. The instant intra-court appeal preferred under Clause 10 of the Letters Patent is directed against the order/judgment dated 09.09.2021 passed by the learned Single Judge of this Court in W.P. (C) No. 2044 of 2021, whereby and whereunder, the order of blacklisting dated 28.05.2021 has been refused to be interfered with by dismissing the writ petition. 3. The brief facts as per the pleading which are required to be enumerated, read as hereunder: A notice inviting tender was issued by the respondent-BCCL on 23.06.2015 inviting application from reputed and experienced contractors for repairing of drain in upgradation colonies under CV Area of BCCL. The writ petitioner-appellant, along with other bidders, participated in the said bid in which the writ petitioner-appellant was declared successful being L-1. The Letter of Acceptance was issued in the year 2018 by which the work order was issued in favour of the writ petitioner-appellant on 16.10.2018. According to the writ petitioner-appellant, no site plan was made available to it. It is the further grievance of the writ petitioner-appellant that after allocation of the site to the writ petitioner-appellant, fire bricks went out of stock in the entire BCCL area and as such, it requested the Area Civil Engineer, CV Area-XII, Barakar, BCCL-respondent No. 4 vide letter dated 20.08.2018 to allow it to use fly-ash bricks, but no response was given. Finally, the site/location plan was made available to the petitioner vide letter dated 07.07.2020, whereby it was instructed to start the work at the earliest. It is the further case of the writ petitioner-appellant that when the writ petitioner-appellant visited the actual site/location, it found several major issues at the site due to which it was not feasible for the petitioner to carry out the work. The writ petitioner-appellant informed the same to the competent authority of the respondent-BCCL vide its representation dated 15.09.2020, but nothing was done. However, one order was issued on 28.05.2021, by which the writ petitioner-appellant was debarred from participating in future tenders of BCCL for a period of 12 months from the date of issuance of the said letter. The writ petitioner-appellant informed the same to the competent authority of the respondent-BCCL vide its representation dated 15.09.2020, but nothing was done. However, one order was issued on 28.05.2021, by which the writ petitioner-appellant was debarred from participating in future tenders of BCCL for a period of 12 months from the date of issuance of the said letter. The writ petitioner-appellant, being aggrieved with the aforesaid order dated 28.05.2021, approached to this Court invoking the jurisdiction of this Court under Article 226 of the Constitution of India being W.P. (C) No. 2044 of 2021 mainly on the ground of violation of principles of natural justice. The respondent-BCCL appeared and agitated the ground of passing the order of black listing for 12 months, reason being that the writ petitioner-appellant who ought to have furnished the performance security within 28 days of issuance of LoA and would commence the work within 10 days of the issuance of the same but the performance security had not been furnished. It is the case of the respondent-BCCL that it is the latches on the part of the writ petitioner-appellant in not furnishing the performance security, as such, the respondent-authorities after taking into consideration the specific clause to that effect, i.e., furnishing the performance security within the period of 28 days as has been stipulated under Clause 4.2 of the agreement, has taken the decision for debarment of the writ petitioner-appellant for participating in future tenders of the BCCL for a period of 12 months. The learned Single Judge, after considering the rival submission advanced on behalf of the parties, refused to interfere with the impugned order of blacklisting the writ petitioner-appellant for a period of 12 months against which the present intra-court appeal has been preferred. 4. Mr. Amritansh Vats, learned counsel for the writ petitioner-appellant has submitted that even accepting what has been said by the learned counsel for the respondent-BCCL about non-furnishing of performance security, then also, it was incumbent upon the respondent-management to provide an opportunity of hearing by issuing notice before passing an order of blacklisting for a period of 12 months but having not done so, the impugned order is not sustainable in the eye of law for utter violation of principles of natural justice. 5. Mr. 5. Mr. Anoop Kumar Mehta, learned counsel for the respondent-BCCL by referring to Annexure-A dated 30.07.2015 and Annexure-B dated 23.06.2015 appended to the said counter affidavit filed before the writ Court, has submitted that several reminders have been given to the writ petitioner-appellant to complete the work within the period stipulated in the agreement, but having not done so, the order of blacklisting for 12 months has been passed. He has further argued referring to Annexure-A appended to the counter affidavit, wherein specific stipulation has been made for furnishing the performance security, that apart from cancelling the Letter of Acceptance and to forfeit the earnest money, decision will also be taken for debarment from participating in future tenders for a minimum period of 12 months, as such, the stipulation made therein that action for debarment from participating in future tenders for a minimum period of 12 months is nothing but be treated as show cause, therefore, the ground which is being taken about violation of principles of natural justice, since no show cause has been issued, cannot be said to be a correct argument. 6. According to Mr. Mehta, the learned Single Judge after taking into the aforesaid stipulation made to the effect that if the performance security will not be furnished within 28 days of the issuance of the Letter of Acceptance, action for debarment from participating in future tenders for a minimum period of 12 months will be taken, the Writ Court has considered it sufficient opportunity and has refused to interfere with the impugned decision taking into consideration that it is the latches on the part of the writ petitioner-appellant in not furnishing the performance security within the stipulated period. 7. This Court has heard the learned counsel for the parties, perused the documents available on record as also the finding recorded by the learned Single Judge. The fact which is not in dispute in the case in hand is that, in pursuance to the notice inviting tender, the writ petitioner-appellant had participated in the process of bid along with other bidders and the writ petitioner-appellant was declared successful being L-1. The Letter of Acceptance for awarding the work has been issued in favour of the writ petitioner on 16.10.2018. The Letter of Acceptance for awarding the work has been issued in favour of the writ petitioner on 16.10.2018. The Letter of Acceptance contains a condition as under condition No. 4.2 wherein the writ petitioner-appellant was required to furnish performance security within the period of 28 days from the date of issuance of Letter of Acceptance. For ready reference, the relevant clause is being reproduced herein-below: “Clause 4.2 Performance Security should be 5% of contract amount and should be submitted within 28 days of issuance of LoA by the successful bidder in the form given below: ................. The Earnest Money/Bid Security deposited in the form of Bank Guarantee shall be discharged when the Bidder has signed the Agreement and furnished the required Performance Security/1st part of security deposit. The bid security deposited in the form of Demand draft/cash may be adjusted against the Performance security (1st part of security deposit) at bidder's option. ................. Failure of the successful bidder to comply with the requirement as above shall constitute sufficient ground for cancellation of the award of work and forfeiture of the bid security/earnest money. In addition to the above penal measures, the bidder will not be allowed to participate in the re-tendering process. The bidder may also be debarred from participating in future tenders in the subsidiary for a minimum period of 12 Months.” 8. Admittedly, the writ petitioner-appellant had not furnished the performance security. However, the grievance of the writ petitioner-appellant is that since the site plan was not furnished and the other requirement had also not been fulfilled, therefore, the performance security had not been furnished in terms of the condition stipulated under Clause 4.2 of the Letter of Acceptance. 9. The respondent-BCCL has issued several reminders for furnishing the performance security and commencement of the work within the stipulated period but the writ petitioner-appellant had not furnished the performance security as also not commenced the work. The reason referred in the writ petition is that the site plan was not provided and other requirement was not fulfilled by the respondent-BCCL. 10. In the aforesaid backdrop, the respondent-BCCL came out with the order taking decision of cancellation of Letter of Acceptance as also debarment of the writ petitioner-appellant for participating in the future tender for a period of 12 months. 10. In the aforesaid backdrop, the respondent-BCCL came out with the order taking decision of cancellation of Letter of Acceptance as also debarment of the writ petitioner-appellant for participating in the future tender for a period of 12 months. The order of debarment for a period of 12 months has been questioned by the writ petitioner-appellant by filing writ petition but the Writ Court refused to interfere with the same on the ground of it is the latches on the part of the writ petitioner-appellant in not furnishing the performance security as also the work could not have been commenced. Further, the debarment order is only for a period of 12 months, which is the minimum period of debarment which could have been passed by the respondent-management, therefore, the said order has not been interfered with. 11. The issue of violation of principles of natural justice has been raised before the learned Singe Judge on behalf of the writ petitioner-appellant. In the case in hand also, submission has been made that since the cardinal principle of natural justice has not been followed while debarring the writ petitioner-appellant for participating in the future tenders, as such, that part of the order is not sustainable in the eye of law. However, Mr. Mehta, learned counsel for the respondent has submitted that several reminders have been given to the writ petitioner-appellant wherein the action proposed to be taken against the writ petitioner-appellant for debarment for a period for 12 months has been communicated as would appear from Annexure-A dated 30.07.2015, therefore, there is no requirement to follow the principles of natural justice. 12. This Court, after appreciating the aforesaid rival submissions, deems it fit and proper to refer that as to whether if any right is being taken away or any penal action is being inflicted upon one or the other, the principles of natural justice is required to be followed or not? 13. The Law is already settled by the Constitution Bench of the Hon’ble Apex Court in Maneka Gandhi vs. Union of India and Another, (1978) 1 SCC 248 wherein the issue fell for consideration about impounding of passport, which was cancelled and the issue was raised that cancellation since was without following the principles of natural justice, therefore, the said cancellation of the impounding of passport is not sustainable in the eye of law. However, the respondent therein had pleaded that since Section 10(3) of the Passport Act does not provide any provision to provide opportunity of hearing before impounding the passport, as such, there is no requirement to follow the principles of natural justice. But, the Hon’ble Apex Court, in that pretext has laid down the law that even there is no express provision under the statute to provide opportunity of hearing before taking any adverse decision/action against the party then also, the principles of natural justice is required to be followed. The relevant paragraph is being reproduced herein-below: “221. It is well established that even where there is no specific provision in a statute or rules made thereunder for showing cause against action proposed to be taken against an individual, which affects the rights of that individual, the duty to give reasonable opportunity to be heard will be implied from the nature of the function to be performed by the authority which has the power to take punitive or damaging action. This principle was laid down by this Court in the State of Orissa vs. Dr. Binapani Dei, AIR 1967 SC 1269 : (1967) 2 SCR 625 : (1967) 2 LLJ 266 in the following words: “The rule that a party to whose prejudice an order is intended to be passed is entitled to a hearing applies alike to judicial tribunals and bodies of persons invested with authority to adjudicate upon matters involving civil consequences. It is one of the fundamental rules of our constitutional set-up that every citizen is protected against exercise of arbitrary authority by the State or its officers. Duty to act judicially would, therefore arise from the very nature of the function intended to be performed: it need not be shown to be superadded. If there is power to decide and determine to the prejudice of a person, duty to act judicially is implicit in the exercise of such power. If the essentials of justice be ignored and an order to the prejudice of a person is made, the order is a nullity. That is a basic concept of the rule of law and importance thereof transcends the significance of a decision in any particular case.” 14. In the context of blacklisting, the Hon’ble Apex Court, in Gorkha Security Services vs. Govt. That is a basic concept of the rule of law and importance thereof transcends the significance of a decision in any particular case.” 14. In the context of blacklisting, the Hon’ble Apex Court, in Gorkha Security Services vs. Govt. (NCT of Delhi) and Others, (2014) 9 SCC 105 relying upon the judgments rendered in Eurasian Equipment and Chemical Ltd. vs. State of West Bengal, (1975) 1 SCC 70 , Raghunath Thakur vs. State of Bihar, (1989) 1 SCC 229 and Patel Engineering Ltd. vs. Union of India, (2012) 11 SCC 257 , has reiterated that the principles of natural justice be followed as would appear from paragraph nos. 16, 17, 18 and 19. The said paragraphs are being quoted herein-below: “Necessity of serving show-cause notice as a requisite of the principles of natural justice 16. It is a common case of the parties that the blacklisting has to be preceded by a show-cause notice. Law in this regard is firmly grounded and does not even demand much amplification. The necessity of compliance with the principles of natural justice by giving the opportunity to the person against whom action of blacklisting is sought to be taken has a valid and solid rationale behind it. With blacklisting, many civil and/or evil consequences follow. It is described as “civil death” of a person who is foisted with the order of blacklisting. Such an order is stigmatic in nature and debars such a person from participating in government tenders which means precluding him from the award of government contracts. 17. Way back in the year 1975, this Court in Erusian Equipment and Chemicals Ltd. vs. State of West Bengal, (1975) 1 SCC 70 , highlighted the necessity of giving an opportunity to such a person by serving a show-cause notice thereby giving him opportunity to meet the allegations which were in the mind of the authority contemplating blacklisting of such a person. This is clear from the reading of Paras 12 and 20 of the said judgment. Necessitating this requirement, the Court observed thus: (SCC pp. 74-75) “12. Under Article 298 of the Constitution the executive power of the Union and the State shall extend to the carrying on of any trade and to the acquisition, holding and disposal of property and the making of contracts for any purpose. Necessitating this requirement, the Court observed thus: (SCC pp. 74-75) “12. Under Article 298 of the Constitution the executive power of the Union and the State shall extend to the carrying on of any trade and to the acquisition, holding and disposal of property and the making of contracts for any purpose. The State can carry on executive function by making a law or without making a law. The exercise of such powers and functions in trade by the State is subject to Part III of the Constitution. Article 14 speaks of equality before the law and equal protection of the laws. Equality of opportunity should apply to matters of public contracts. The State has the right to trade. The State has there the duty to observe equality. An ordinary individual can choose not to deal with any person. The Government cannot choose to exclude persons by discrimination. The order of blacklisting has the effect of depriving a person of equality of opportunity in the matter of public contract. A person who is on the approved list is unable to enter into advantageous relations with the Government because of the order of blacklisting. A person who has been dealing with the Government in the matter of sale and purchase of materials has a legitimate interest or expectation. When the State acts to the prejudice of a person it has to be supported by legality. 20. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains. The fact that a disability is created by the order of blacklisting indicates that the relevant authority is to have an objective satisfaction. Fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the blacklist.” 18. Again, in Raghunath Thakur vs. State of Bihar, (1989) 1 SCC 229 the aforesaid principle was reiterated in the following manner: (SCC p. 230, Para 4) “4. Indisputably, no notice had been given to the appellant of the proposal of blacklisting the appellant. It was contended on behalf of the State Government that there was no requirement in the rule of giving any prior notice before blacklisting any person. Insofar as the contention that there is no requirement specifically of giving any notice is concerned, the respondent is right. It was contended on behalf of the State Government that there was no requirement in the rule of giving any prior notice before blacklisting any person. Insofar as the contention that there is no requirement specifically of giving any notice is concerned, the respondent is right. But it is an implied principle of the rule of law that any order having civil consequence should be passed only after following the principles of natural justice. It has to be realised that blacklisting any person in respect of business ventures has civil consequence for the future business of the person concerned in any event. Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order. In that view of the matter, the last portion of the order insofar as it directs blacklisting of the appellant in respect of future contracts, cannot be sustained in law. In the premises, that portion of the order directing that the appellant be placed in the blacklist in respect of future contracts under the Collector is set aside. So far as the cancellation of the bid of the appellant is concerned, that is not affected. This order will, however, not prevent the State Government or the appropriate authorities from taking any future steps for blacklisting the appellant if the Government is so entitled to do in accordance with law i.e. after giving the appellant due notice and an opportunity of making representation. After hearing the appellant, the State Government will be at liberty to pass any order in accordance with law indicating the reasons therefor. We, however, make it quite clear that we are not expressing any opinion on the correctness or otherwise of the allegations made against the appellant. The appeal is thus disposed of.” 19. Recently, in Patel Engg. Ltd. vs. Union of India, (2012) 11 SCC 257 : (2013) 1 SCC (Civ) 445 speaking through one of us (Jasti Chelameswar, J.) this Court emphatically reiterated the principle by explaining the same in the following manner: (SCC pp. 262-263, Paras 13-15) “13. The concept of “blacklisting” is explained by this Court in Erusian Equipment and Chemicals Ltd. vs. State of West Bengal, (1975) 1 SCC 70 as under: (SCC p. 75, Para 20) “20. 262-263, Paras 13-15) “13. The concept of “blacklisting” is explained by this Court in Erusian Equipment and Chemicals Ltd. vs. State of West Bengal, (1975) 1 SCC 70 as under: (SCC p. 75, Para 20) “20. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains.” 14. The nature of the authority of the State to blacklist the persons was considered by this Court in the abovementioned case: “12. Under Article 298 of the Constitution the executive power of the Union and the State shall extend to the carrying on of any trade and to the acquisition, holding and disposal of property and the making of contracts for any purpose. The State can carry on executive function by making a law or without making a law. The exercise of such powers and functions in trade by the State is subject to Part III of the Constitution. Article 14 speaks of equality before the law and equal protection of the laws. Equality of opportunity should apply to matters of public contracts. The State has the right to trade. The State has there the duty to observe equality. An ordinary individual can choose not to deal with any person. The Government cannot choose to exclude persons by discrimination. The order of blacklisting has the effect of depriving a person of equality of opportunity in the matter of public contract. A person who is on the approved list is unable to enter into advantageous relations with the Government because of the order of blacklisting. A person who has been dealing with the Government in the matter of sale and purchase of materials has a legitimate interest or expectation.” Erusian Equipment and Chemicals Ltd. vs. State of West Bengal, (1975) 1 SCC 70 : (1975) 1 SCC 70 , SCC p. 74, Para 12) and took note of the constitutional provision (Article 298): “298. Power to carry on trade, etc. Power to carry on trade, etc. - The executive power of the Union and of each State shall extend to the carrying on of any trade or business and to the acquisition, holding and disposal of property and the making of contracts for any purpose: Provided that: (a) the said executive power of the Union shall, insofar as such trade or business or such purpose is not one with respect to which Parliament may make laws, be subject in each State to legislation by the State. (b) the said executive power of each State shall, insofar as such trade or business or such purpose is not one with respect to which the State Legislature may make laws, be subject to legislation by Parliament.” Which authorises both the Union of India and the States to make contracts for any purpose and to carry on any trade or business. It also authorises the acquisition, holding and disposal of property. This Court also took note of the fact that the right to make a contract includes the right not to make a contract. By definition, the said right is inherent in every person capable of entering into a contract. However, such a right either to enter or not to enter into a contract with any person is subject to a constitutional obligation to obey the command of Article 14. Though nobody has any right to compel the State to enter into a contract, everybody has a right to be treated equally when the State seeks to establish contractual relationships. “17. The Government is a Government of laws and not of men. It is true that neither the petitioner nor the respondent has any right to enter into a contract but they are entitled to equal treatment with others who offer tender or quotations for the purchase of the goods. The privilege arises because it is the Government which is trading with the public and the democratic form of Government demands equality and absence of arbitrariness and discrimination in such transactions. Hohfeld treats privileges as a form of liberty as opposed to a duty. The activities of the Government have a public element and, therefore, there should be fairness and equality. The State need not enter into any contract with any one but if it does so, it must do so fairly without discrimination and without unfair procedure. Hohfeld treats privileges as a form of liberty as opposed to a duty. The activities of the Government have a public element and, therefore, there should be fairness and equality. The State need not enter into any contract with any one but if it does so, it must do so fairly without discrimination and without unfair procedure. Reputation is a part of a person's character and personality. Blacklisting tarnishes one's reputation.” Erusian Equipment and Chemicals Ltd. vs. State of West Bengal, (1975) 1 SCC 70 : (1975) 1 SCC 70 . The effect of excluding a person from entering into a contractual relationship with the State would be to deprive such person to be treated equally with those, who are also engaged in similar activity. 15. It follows from the above judgment in Erusian Equipment and Chemicals Ltd. vs. State of West Bengal, (1975) 1 SCC 70 that the decision of the State or its instrumentalities not to deal with certain persons or class of persons on account of the undesirability of entering into the contractual relationship with such persons is called blacklisting. The State can decline to enter into a contractual relationship with a person or a class of persons for a legitimate purpose. The authority of the State to blacklist a person is a necessary concomitant to the executive power of the State to carry on the trade or the business and making of contracts for any purpose, etc. There need not be any statutory grant of such power. The only legal limitation upon the exercise of such an authority is that the State is to act fairly and rationally without in any way being arbitrary-thereby such a decision can be taken for some legitimate purpose. What is the legitimate purpose that is sought to be achieved by the State in a given case can vary depending upon various factors.” 15. Thus, there is no dispute about the fact that the cardinal principle of natural justice is mandatorily to be followed in a case where any adverse decision/action is being taken against one or the other. The issuance of notice means that the person against whom any adverse action proposed to be taken, is required to be provided with the opportunity of hearing. 16. Mr. The issuance of notice means that the person against whom any adverse action proposed to be taken, is required to be provided with the opportunity of hearing. 16. Mr. Mehta, learned counsel has submitted by referring to the communication dated 30.07.2015 that the stipulation made therein about taking penal action for debarment for 12 months has been referred can be treated to be a show cause. But, this Court is not in agreement with such submission because the communication dated 30.07.2015 speaks about cancellation of LoA and also to take penal action for debarment for a period of 12 months and according to the considered view of this Court, the said stipulation cannot be said to be a show cause notice rather it is the decision taken by the concerned authority to take such penal action against the writ petitioner-appellant but as per the requirement of Law, as has been held by the Hon’ble Apex Court in the judgments referred hereinbove, the writ petitioner-appellant ought to have been provided with an opportunity of hearing before taking any adverse decision of debarring the writ petitioner-appellant. 17. This Court, therefore, is of the view that the order passed by the administrative authority dated 28.05.2021 suffers from material irregularities since the writ petitioner-appellant has not been provided with the opportunity of hearing before taking any adverse action. This Court, further, is not in agreement with the finding recorded by the learned Single Judge that since the writ petitioner-appellant has not performed the duty casted upon him in pursuance to the terms and conditions referred in the Letter of Acceptance and the order of debarment is for a minimum period of 12 months, as such, the requirement of principles of natural justice is not required to be followed. Reason being that, there might be error on the part of the writ petitioner-appellant, that may be a cause to take action against the writ petitioner-appellant but before taking such decision, the principles of natural justice is required to be followed. Further, merely because the order of blacklisting is minimum for 12 months, even in that circumstances, the principles of natural justice is required to be followed and it cannot be waived out depending upon the quantum of punishment. 18. Further, merely because the order of blacklisting is minimum for 12 months, even in that circumstances, the principles of natural justice is required to be followed and it cannot be waived out depending upon the quantum of punishment. 18. According to our considered view, even if debarment is for a day, it will cast stigma upon the concerned party which will be taken against him for all the time to come and thereby, the effect of that order will be stigmatic in nature and in that circumstances, the person concerned is required to be provided opportunity of hearing before taking such decision. 19. This Court, therefore, is of the view on the basis of the facts discussed above, that the order passed by the learned Single Jude in refusing to interfere with the decision of the administrative authority, so far as it relates to debarring the writ petitioner-appellant from participating in future tenders for a period of 12 months, is not sustainable in the eye of law. 20. Accordingly, the order passed by the learned Single Judge suffers from patent illegality. In view thereof, the instant appeal stands allowed and the order impugned is quashed and set aside. In consequence thereof, the writ petition stands allowed. 21. It is left open upon the respondent-BCCL, if so desire, to take fresh decision in accordance with law. 22. Needless to say that in case of such decision, the respondent-BCCL will follow the principles of natural justice.